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South African FMCG Retail – Undercovering The Current State Of Play

  • 3 min read

A new report from Trade Intelligence reveals an FMCG retail trade that is under enormous pressure – but that continues to innovate, to serve shoppers, and even to turn a profit.

South Africa’s economic landscape is challenging for any business, but particularly so for players in the consumer goods industry. The complexity in this sector is mind-blowing, with thousands of suppliers bringing brands to market in a competitive and rapidly evolving retail environment, dependent on a vast network of logistics providers across an increasingly globalised supply chain.

And this is before factoring in the particular challenges of the present – supply chains disrupted by a global pandemic or a stranded ship, the impact of an energy crisis on a developing country, persistent unemployment, rising inflation driven by geopolitics, the disruption both positive and negative of new technologies. It is possible to disentangle some major market dynamics from the clutter, however, and makes sense of the trading landscape.

There’s no doubt that we’re looking at a confluence of variables like we’ve never seen before,” says Andrea du Plessis, a senior retail analyst with Trade Intelligence. “But we’ve identified a number of key trends and dynamics within that, which give some shape to the apparent chaos.

Some of these trends seem to be countervailing. For example, most retailers are compelled in difficult economic times to stretch their target market, leading to channel blurring within trading brands. At the same time, to reach shoppers who are shopping across channels, they are becoming hyper-segmented across formats, from forecourt convenience to big-box discount. Retailers are also launching specialised spinoffs of the main brand – in categories like pet supplies, baby essentials, liquor, even outdoor, to leverage their supply chains and brand identities, and hedge against the challenges of the day.

Some of these market dynamics result from external factors that the retailers themselves are not driving, but have to respond to,” explains du Plessis. For example, purchasing power is constrained across the economic spectrum as inflation, interest rate hikes and unemployment all put a squeeze on disposable household income. And load shedding has long passed the stage of being a personal or societal inconvenience and is now suppressing economic growth and the revenues of businesses both large and small – increasing input prices, reducing trading hours, and flattening consumer demand.

In this challenging environment, the businesses best able to navigate complexity are those positioned to win, and for this they need information in the form of data and insights. The new SA FMCG Landscape Now report from Trade Intelligence provides a top-down look at South Africa’s FMCG trade, from the macro-economic environment to consumer behaviour to the trading strategies of the individual retailers over the first quarter of 2023. It includes a particular focus on the impacts of load shedding – looking at both how it is impacting the bottom line for South Africa’s retailers, and what they are doing to adapt.

The report looks at the likely factors which will continue to press on the industry in the near term, providing an overall view of a sector which is both resilient and agile in the face of adversity. “What we’re seeing is that South Africa’s retailers continue to innovate, even under enormous strain, and that most of them are still performing quite well,” says du Plessis. “The important thing for any business is not to put their heads in the sand. Our current challenges are not going to go away in a hurry. Every business needs to stay informed.